Big EU Meeting as First Quarter Ends

March 30, 2012

The dollar is softer at the New York opening on this final day of the calendar quarter with drops of 0.5% against the kiwi, 0.4% versus the yen and Swissie, 0.3% relative to the euro and sterling, 0.2% against the yuan and 0.1% against the Australian dollar.

Stocks performed better than earlier this week. Equities climbed 2.0% in India, 1.1% in Pakistan, 0.8% in Taiwan, 0.7% in Malaysia, 0.5% in China and 0.4% in New Zealand, Indonesia, and the Philippines. But share prices eased 0.3% in Japan and Hong Kong, 0.2% in South Korea, and 0.1% in Australia. In Europe, the Paris Cac and German Dax are 1.2% and 1.0% stronger ahead of an expected decision by Euroland finance ministers to lift the Eurozone firewall by nearly EUR 800 billion. They are meeting today in Copenhagen. The British Ftse is 0.6% higher.

Peripheral sovereign debt yields in Spain, Portugal, Ireland, and Italy remain painfully high. The 10-year German bund yield firmed a basis point, while the 10-year Japanese JGB is closing out fiscal 2011 at 0.99%, down a basis point from Thursday, 6 basis points lower than the fiscal year average, and below the key 1.00% threshold. Former ECB Council member Juergen Stark said central bank officials had not expected banks to bid so heavily at the three-year LTROs.

Oil and gold prices rose 0.5% and 0.7% to $103.30 per barrel and $1667.10 per ounce.

Several Japanese economic indicators were released on this final day of the fiscal year.

Industrial output dropped 1.2% in February. Officials had predicted an increase. Output was 1.5% higher than in February 2011 and 2.9% stronger in January/February than the 4Q mean. The inventory to shipments ratio sank 3.9% on month as inventories stagnated.

Motor vehicle production was 19.7% higher in February this leap year month than in February 2011.

Housing starts advanced 7.5% on year in February after posting a 1.1% drop in January. Analysts had projected another decline.

Construction orders, which in January were 24.6% greater than a year before, recorded a 1.8% 12-month rate of decline in February.

The jobless rate slid back to 4.5% in February from 4.6% in January, and the job seekers ratio continued to recover with a 0.02 increase to 0.75. However, employment was 0.6% below its year-earlier level.

Consumer prices increased by 0.2% on month and 0.3% on year in February. Inflation was at a 12-month pace of 0.1% excluding seasonal food, a 5-month high, and at negative 0.6% excluding food and energy. Tokyo’s non-food and energy CPI was 1.0% lower in March than a year before.

Japan’s manufacturing purchasing managers index rose by 0.6 points to 51.1 in March, highest since last August and the fourth straight reading above the 50 expansion/contraction cutoff line.

Real household spending recorded a third straight monthly advance, increasing 2.0% in February after 0.4% in January and 0.2% in December. Spending exceeded the year-earlier level in February by 2.9%, fueled by a 2.5% on-year rise in real incomes this leap year.

The preliminary estimate of Euroland consumer price inflation for March, a 12-month 2.6% advance after 2.7% in February, was above forecasts of 2.5%.

Despite better than expected labor market trends, Germany reported another disappointing month of retail sales, which on a volume basis fell 1.1% in February and increased just 1.7% on year. Real sales in the first two months of 2012 were 1.6% below the 4Q11 average level.

The Swiss index of leading economic indicators improved by a greater-than-anticipated 0.19 points to +0.08 in March, but the fourth quarter current account surplus of CHF 26.5 billion was smaller than the third quarter surplus.

British consumer confidence worsened unexpectedly by two points to a reading of negative 31 on the GFK gauge.

French real consumer spending soared 3.0% in February, the most for any month since November 1995, but was only 0.5% higher than a year before.

French total producer prices increased 0.7% last month and 3.6% from a year earlier. Domestic prices increased 0.8%, while import prices fell by 0.5%. Italian producer price inflation slowed to 3.1% from 3.4% in January. Italian CPI inflation held steady at 3.3% in March, and wage inflation in Italy equaled 1.4% in both December and January. Dutch PPI inflation slowed from 5.2% in January to 4.7% in February. Hungarian PPI inflation fell to 6.2% from 7.8% in January.

Between February 2011 and February 2012, Portuguese industrial production and retail sales sank by 6.8% and 8.9%, more than the respective 12-month drops in January. Greek real retail sales were 10.3% weaker in January than a year before. Greek Prime Minister Papademos would not rule out another aid package for Greece in the future. Spanish retail sales volume in February was 3.4% lower than a year earlier. Spain’s current account posted a deficit in January of EUR 5.7 billion versus EUR 3.6 billion in December and EUR 6.2 billion in the first month of 2011.

Danish GDP dipped 0.1% last quarter and rose only 0.5% from 4Q10. Norway’s manufacturing purchasing managers index jumped 3.0 points to 59.7 in March, while Norwegian retail sales recorded gains of 1.0% on month and 7.0% on year in February.

Australian industrial production advanced by 0.8% between 3Q11 and 4Q11 and 2.1% from the final quarter of 2010. New home sales rose 3.0% to a 3-month high last month. Australian M3 money grew 7.7% in the year to February, down from 8.1% in January. Private sector credit growth remained at 3.5% on year. New Zealand building permits sank 6.7% in February, reversing almost all of January’s 8.1% advance. New Zealand M3 money posted a 5.2% on-year advance in February.

South Korean GDP firmed 0.3% in the final quarter of 2011 and rose 3.3% from a year earlier. Industrial production in February was a greater-than-forecast 14.4% higher than a year before, however. Malaysian PPI inflation climbed to 4.3% last month from 4.1% in January. Business sentiment in Thailand improved 1.9 points to a reading of 52.7 in February.

Today, the United States releases personal income and spending, the U. Michigan index of consumer sentiment, and the Chicago purchasing managers index. Canada, which released its 2012 budget yesterday, reports January monthly GDP figures today.

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